Selangor's water plan remains doubtful

21 December 2010

The Star

PETALING JAYA: Despite the state government's efforts to work out a new
offer to take over the water concessionaires in Selangor, industry
observers are still sceptical that such efforts will resolve the state's
water restructuring exercise any time soon.

It was reported recently that the Selangor government and Syarikat Bekalan Air Selangor Sdn Bhd (Syabas) would start negotiations again to solve the state water impasse.

Industry observers were reluctant to speculate on what the Selangor government had to offer to the state's water concessionaires this time, but it was understood that the state government was looking at deploying an international arbiter to determine a fair price to buy up the companies.

There are four water companies operating in Selangor, including Syabas, which has the mandate to supply treated water to Kuala Lumpur, Selangor and Putrajaya.

The state government had previously made two offers to the concessionaires: one for RM5.7bil in early 2009 that was rejected by all players and another in the middle of last year for RM9.4bil that was rejected by Syabas.

The Federal Government had also made an offer of RM10.3bil last year but it was turned down by Syabas.

Even Gamuda Bhd, which had a 40% interest in Splash, had in the early part of this year stepped in with a takeover proposal valued at RM10.8bil. But the offer was also rejected on the basis that it was not in line with the spirit of the reforms. It was understood that the Selangor government this time would seek the involvement of the Federal Government under its new offer to help break the deadlock.

The Energy, Green Technology and Water Ministry had earlier given the Selangor government a deadline up to end of this month to resolve the state's water situation. With only two weeks remaining, it was very likely that the deadline would lapse again without a clear solution in sight. One of the main issues of the Selangor water restructuring had to do with the proposed tariff hike by Syabas, which had been deferred pending the restructuring talks. Syabas was supposed to raise tariffs by 37% in January 2009 as per the concession agreement, but that did not materialise as the Pakatan Rakyat-led Selangor government claimed that Syabas did not fulfil certain criteria for that hike.

Selangor claimed it was crucial for it to take over the state's entire water industry to ensure that the people received cheap and good quality water. It explained that if the state government did not take over the water concessionaires, there would be a 37% tariff increase followed by 25% and 20% increases within the next six years.

In contrast, if the water industry was managed by the Selangor government, the tariff increase would only be an initial 12% followed by two 12% rises within the same time frame.